Business Services

Despite uncertainty in some parts of the market in 2023, many Harris Williams clients in business services generated strong attention from investors, highlighting the continued attractiveness of high-quality, differentiated businesses with defensible market positions and resilient revenue.

Looking ahead, we’re encouraged by moderating inflation, a resilient labor market, a positive stock market trajectory, healthy company earnings, and stable interest rates. At the same time, we are closely watching macroeconomic conditions and potential market disruptions, including the upcoming U.S. election and ongoing global geopolitical conflicts. Read more about the trends impacting the overall market >

Proven Appeal and Fresh Innovation in 2024

In the business services industry, buyers were drawn in 2023 to businesses with healthy cashflow, recurring revenue, stable markets, and visible, predictable demand driven by ongoing, non-discretionary needs. The most sought-after businesses have found better ways than the competition to address long-term challenges impacting multiple large and stable end-markets. Looking ahead, business services companies that embrace the potential of generative AI to compensate for labor challenges and provide greater value to customers will be prioritized by investors.

Addressing Significant Recurring Needs

Waste Harmonics illustrates buyer interest in companies with better solutions to significant, recurring customer needs. The company provides waste and recycling management supported by innovative technology and data insights customers use to better manage their ESG programs. As waste streams become more complex and regulations more burdensome, we expect there will continue to be a shift toward managed waste services providers. In addition to valuing these qualities, potential buyers were drawn to the waste services market, which is large, generally untethered to the economy, has limited seasonality, and features predictable and resilient revenue streams.

Digitizing Daily Decisions

Investors have also shown robust interest in business services companies that can harness technology and data to drive better decision making in large and stable industries, including legal services. In the legal industry, tech adoption and data analytics are becoming more imperative to drive productivity, lower costs, and improve workflows. Chambers and Partners is a prime example of an innovative business bringing a better solution to these formidable challenges. Deeply embedded in the fabric of the legal ecosystem, the company empowers the legal market to make the most informed decisions with detailed rankings and insights on lawyers, law firms, and legal departments, cementing a leading position in a fast-growing space.

Delivering Essential Products

GME Supply Company also exemplifies these dynamics. This leading distributor of critical worker safety and productivity supplies to field-deployed technicians serves several highly resilient and predictable infrastructure end markets. The company differentiates itself through its extensive array of technical and essential products, a technology-first go-to-market strategy, timely service, and proven domain expertise. GME has also achieved exceptional cashflow dynamics and capital efficiency, both highly attractive qualities to today’s investors.

BradyIFS further demonstrates how a superior value proposition in a stable and predictable market can yield strong investor interest. This janitorial supply, equipment, and foodservice distributor provides a broad range of products to thousands of customers in segments including education, healthcare, hospitality, restaurants, building services, and more. Buyers were drawn to these qualities, plus the company’s better customer service, product knowledge, and operational excellence.

Looking Ahead

Due to their powerful combination of predictable, recurring revenue, non-deferrable demand, and large and diverse end markets, a range of subsectors within business services will continue to attract investor interest throughout 2024. For instance, accounting, consulting, and legal services support business activities that remain steady regardless of economic conditions, as do non-discretionary facility services businesses such as HVAC, building automation, fire and life safety, and mechanical services.

The long-term drive to modernize IT infrastructure, the ongoing shortage of experienced technology talent, and the complexity sparked by remote and hybrid work environments ensure tech-enabled services will also continue to attract attention.

Likewise, the supply chain challenges of the past few years—most recently in the form of inventory surpluses—have helped foster continuing investor interest in consultative, tech-enabled specialty distributors. That’s especially true for businesses serving end markets with strong and stable demand for mission-critical supplies.

At the same time, generative AI is poised to create new growth opportunities for innovative businesses and their investors. While discussions of AI used to focus on its relative risk to companies in business services, organizations are increasingly embracing the potential of AI to help compensate for scarce skilled labor and provide greater value to customers. For example, GenAI adoption is accelerating in the legal industry thanks to evolving applications that span legal workflows. Both legal tech and legal services firms are looking to capitalize on the expanding use cases of GenAI to better meet the needs of law firms and in-house counsel. Looking forward, we believe business services companies able to use GenAI to deliver a better customer experience will be prioritized by investors, as will technology providers helping to drive this transformation.

Overall, the unique combination of established business services subsectors with disruptive technology is creating exciting opportunities for a wide range of investors.

To discuss opportunities in business services, please contact our senior professionals.